HSBC J.P. Morgan Standard Chartered Bank - bicbanco

The Bank has no control over, and cannot predict, any measures or policies adopted by the Brazilian
government in the future. The Bank’s business, results of operations, financial condition and the market for the
notes may be adversely affected by changes in policies or rules involving the factors such as:
• banking regulations;
• the regulatory environment;
• interest rates;
• exchange rate variations;
• exchange control policies;
• inflation;
• liquidity of domestic capital and lending markets;
• tax policies; and
• other political, diplomatic, social and economic developments affecting Brazil.
In October 2010, presidential elections will take place in Brazil. Even though the federal government has
adopted solid economic policies over the last few years, uncertainties, in relation to the implementation by the new
government of changes relating to the monetary, tax and pension funds policies as well as to the relevant legislation
may contribute to economic instability. These uncertainties and new measures may increase market volatility of
Brazilian securities issued abroad. It is not possible to predict whether the government elected in 2010 or any
succeeding governments will have an adverse effect on the Brazilian economy, the Brazilian securities market, and,
consequently, on the Bank’s businesses.
Inflation, and government measures to curb inflation, may contribute significantly to economic uncertainty in
Brazil and to heightened volatility in the Brazilian securities market.
Brazil has historically experienced extremely high rates of inflation. More recently, inflation rates in Brazil
for the years ended December 31, 2009, 2008 and 2007, as measured by the national consumer price index (Indice
de Preços ao Consumidor Amplo) or IPCA, were 4.31%, 5.9% and 4.5%, respectively. Inflation and governmental
measures to combat inflation have historically had significant negative effects on the Brazilian economy. Inflation,
together with government measures to combat inflation and public speculation about possible future government
measures, has had significant negative effects on the Brazilian economy and contributed to increase economic
uncertainty in Brazil and heighten volatility in the Brazilian securities markets, which may have an adverse effect on
the Bank.
These measures to combat inflation have historically included maintaining a tight monetary policy with
high interest rates, thereby restricting the availability of credit and reducing economic growth. As a result, interest
rates, as measured by SELIC, have fluctuated significantly. Increases in the SELIC rate may have an adverse effect
on the Bank by reducing demand for its credit, and increasing its cost of funds, domestic debt expense and the risk
of customer default. Decreases in the SELIC rate may also have an adverse effect on the Bank by decreasing the
interest income it earns on its interest-earning assets and lowering its revenues and margins.
Future Brazilian government actions, including interest rate decreases, intervention in the foreign exchange
market and actions to adjust or fix the value of the real may trigger increases in inflation. If Brazil experiences
fluctuations in rates of inflation in the future, the Bank’s costs and net margins may be affected and, if investor
confidence lags, the price of the Bank’s securities may fall. Inflationary pressures may also affect the Bank’s ability
to access foreign financial markets and may lead to counter-inflationary policies that may have an adverse effect on
the Bank’s business, financial condition, results of operations and the market price of the notes.
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